Uber and Lyft messed with Texas — and won

Bid Wallace wore a big grin as he pulled his silver SUV into the Austin parking lot where I was waiting for a ride.

“Everybody is smiling today,” he told me as I climbed in.

After
a year-long hiatus, Wallace last month was driving again for Lyft in
the Texas capital. It was his first day back, and work was steady.

In
May 2016, both Uber and Lyft pulled out of Austin after a bitter
showdown with local regulators. City lawmakers had passed an ordinance
the previous December requiring, among other things, that ride-hailing
companies add fingerprint background checks for their drivers. Uber and
Lyft refused to comply, saying their private background checks were
thorough enough. They called the requirements overly burdensome.

It was a standstill — until last month, when Texas Governor Greg Abbot signed a bill that overrode all local ride-hailing laws in the state. Uber and Lyft can now operate anywhere in Texas without fingerprinting their drivers.

“A patchwork quilt of compliance complexities are forcing businesses out of the Lone Star State,” Abbott said in a statement when he passed the law. “My goal as Governor is to remove the barriers of government to encourage competition and empower consumers to choose.”

What happened in Texas was unprecedented in the ride-hailing
industry, the result of a coordinated campaign to influence lawmakers.
But it’s no one-off. The Texas effort serves as both a blueprint and a
message from the archrivals to other cities and states: If you mess with
the two biggest ride-hailing companies in the US, you’d best be ready
for a fight.

“They wanted to make Austin a test case, so all over the country and all over the world they could say, ‘You can’t stand in our way, or we’ll crush you,'” said Andrew Wheat, research director for watchdog group Texans for Public Justice.

“If this was their Alamo, where anyone who stood in their way was massacred, then they can use that all over the country.”

Remember the Alamo

Uber and Lyft have been dogged by hundreds of allegations of drivers assaulting, raping and kidnapping passengers. These problems, along with allegations a chaotic company culture and sexual harassment, pushed Uber CEO Travis Kalanick to resign on Tuesday. As a result, lawmakers are grappling with how to make these services safer. Many, including those in Texas, Massachusetts, California and New York, believe fingerprinting potential drivers is the best way to catch criminals. But Uber and Lyft say it slows their on-boarding process for drivers. And it appears the companies didn’t want a precedent set in Austin.

To find out how Uber and Lyft won their battle of the Alamo, you have to follow the money.

Shortly before Abbot signed the state law in May, Uber and Lyft had spent up to $2.3 million on 40 lobbyists, according to public records filed with the Texas Ethics Commission. But that’s possibly only a fraction of what they’ve thrown at the effort.

Their campaign goes back several years but really got heated toward the end of 2015 when the Austin city council began hammering out the ordinance that would require ride-hailing drivers to get fingerprint background checks by February 2017. The ordinance also prohibited passenger pickups and drop-offs in traffic lanes, required all ride-hailing vehicles be identified and imposed data-reporting rules on the companies. Those are pretty much the same regulations that taxi drivers in Austin also have to follow.

Even
before the city council passed the ordinance that December, Uber and
Lyft had been ramping up their lobbying spending on the city level,
according to Wheat. But the city council stood firm and passed the
ordinance anyway.

In response, Uber and Lyft united under an umbrella organization called “Ridesharing Works for Austin,” according to public documents filed at Austin’s City Hall. That alone is striking since the two companies are such notorious rivals.

Together, and for the first time, they launched their own political
campaign: Vote for Prop 1, which became a ballot initiative aimed at
toppling the ordinance. It claimed Austin was safer without the law and,
if it remained, local taxpayers would have to cover the cost of
fingerprint background checks — something the city never said.

The
two companies ran TV commercials, sent out mailers, staffed phone
banks, texted voters and distributed fliers at concerts and festivals.
By some estimates, they poured at least $8.6 million into Prop 1; other
estimates put that number at more than $10 million. Either way, it’s the
most ever spent on a political campaign in Austin’s history — and more
than seven times the second most-expensive campaign, which was $1.2
million spent for the 2014 election of Mayor Steve Adler.

“Uber and Lyft had huge amounts of money and large amounts of arrogance and hubris in this fight with Austin,” Wheat said.

Just before the vote, the two companies warned that if Prop 1 didn’t pass, they’d leave Austin.

And that’s what happened.

Even
after offering free rides to the polls, Uber and Lyft’s Prop 1 was
defeated in a 56-44 vote in May 2016. Two days later, the companies
pulled out of the city.

At the time, Uber said, “Disappointment does not begin to describe how we feel about shutting down operations in Austin.”

Lyft
also shared its regrets: “We have to take a stand for a long-term path
forward that lets ride-sharing continue to grow across the country.”

Texas hold’em

Meanwhile, Uber and Lyft were already plotting their return, setting their sights on state lawmakers.

The plan: Pass statewide regulation that would override Austin’s ordinance.

Such a bill would help the companies across Texas. Austin, Houston, Corpus Christi and other cities in the state had passed laws requiring ride-hailing drivers to get fingerprint background checks. Uber begrudgingly kept operations going in Houston after those regulations were instituted in 2014, but Lyft left the city.

In 2017, Uber had 26 lobbyists in Texas and had increased its state lobby spending 23 percent over 2016 levels, and nearly 50 percent over 2015, according to Texans for Public Justice, which tracks lobbying spending through public documents. Uber spent as much as $1.6 million on lobbying in 2017, twice as much as Lyft. In 2017, Lyft had 14 lobbyists and bumped its spending 88 percent from the previous year to as much as $760,000.

Together they coughed up as
much as $2.3 million in Texas lobbying just in 2017, and up to $5.5
million since 2014. The two companies also doled out $40,500 in
corporate contributions this year. For example, Lyft gave $5,000 to both
the Republican and Democratic parties, according to Texans for Public
Justice.

Lyft declined to comment on its lobbying spending. Uber didn’t return a request for comment.

The companies’ investments paid off.

The Texas senate approved a bill on May 17 giving the state authority to regulate ride-hailing. Governor Abbot signed it less than two weeks later. As far as the state was concerned, Uber and Lyft didn’t have to fingerprint drivers.

“Make no mistake, people will be harmed because of this bill,” said Dean Rindy, an organizer of the anti-Prop 1 campaign called “Our City, Our Safety, Our Choice.” He added that law enforcement agrees fingerprinting is “the safest way to protect customers.”

The day Abbot signed the bill, Uber and Lyft announced
they were back in action in Austin, and Lyft said it was returning to
Houston a couple of days later.

“Riders and drivers are the real
winners today,” Chelsea Harrison, Lyft’s senior policy communications
manager, said in a statement when Abbot signed the bill on May 29. “We
want to thank Governor Abbott and the Legislature for their leadership
on this important issue.”

Uber apologized for not being around the past year.

“Our
local team is focused on making sure that Uber works for Austinites and
helping our driver-partners earn,” Uber spokesman Travis Considine
said. “We know that we have a lot of work to do in the city, but we
couldn’t be more excited for the road ahead.”

Beyond Texas, Uber and Lyft have also lobbied to create blanket laws in other states, including New Jersey, Florida and Nevada.

Deep in the heart of Texas

Now both companies are scrambling to earn back the trust of riders and drivers in Austin.

Brandon
Kelly was born and raised in the city. He’s a big guy who stands well
over six feet tall and sports a gold tooth that lights up his smile.
Kelly was one of the first drivers for Uber and Lyft when they started
operating in the city in 2014.

“This is my main income,” Kelly
told me when I asked what it was like when the companies pulled out of
the city last year. “They had no kind of plan for the drivers. That was
the thing I was upset about. I thought if only y’all been committed to
us like we been committed to y’all.”

During Uber and Lyft’s pause in Austin, a handful of smaller ride-hailing companies — including Ride Austin, Fare, Fasten and Get Me — entered to fill the void. All complied with the city ordinance and fingerprinted drivers.

Kelly, who drove for these other companies too, said he had no problem with being fingerprinted.

But now that Uber and Lyft are back, those smaller companies are having trouble competing. Fare pulled out of Austin because it was “unable to endure the recent loss of business.” And after seeing its trips plummet, Ride Austin lowered its fares to match those of Uber and Lyft.

Austin Mayor Adler said he was disappointed the state passed a bill that essentially counters the wishes of Austin voters.

“Our
city should be proud of how we filled the gap created when Uber and
Lyft left,” Adler said in a statement on May 17. “We now must hope that
they return ready to compete in a way that reflects Austin’s values.”

The mayor’s spokesman said the city has no plans to challenge the state bill.

Kelly,
Wallace and other drivers I spoke with are back driving for Uber and
Lyft again. While they didn’t mind driving for the smaller startups,
they say they have steadier business with Uber and Lyft.

Customers have been nonstop, Wallace said. That could be because of brand loyalty, or it could be for other reasons.

“I think people are taking them today, just because they can,” said Wallace.